Your credit history reflects how you’ve managed debt in the past. And that history shows up in your credit score—a three-digit number that summarizes the information in your credit report.
Creditors can use that score to determine creditworthiness and when setting the terms of loans, including mortgages. And landlords may use it when you apply for an apartment. So maintaining a good credit score can have a big impact on your financial future.
What Affects Credit Scores?
There are multiple factors that can affect your credit score. Things like bill-payment history, credit utilization, age of credit accounts and recent credit inquiries can all play a role. The number and types of balances you have can also impact your score.
It’s important to remember there are different scoring models. FICO® and VantageScore® are two common examples. Each uses their own formula to calculate different scores, so you might see a slight difference between them.
Ultimately, each lender uses their own credit policies to determine an applicant’s creditworthiness. But a good credit score can still mean you’re more likely to qualify for a loan or get a better interest rate.
Steps to Maintaining Your Credit Score
A good credit score depends on using credit responsibly over time. Here are a few tips from the Consumer Financial Protection Bureau (CFPB) to help keep your score up:
1. Pay Your Bills on Time
Paying your credit card bills and other loans on time is important—especially since a history of late or missed payments could cause a dip in your credit score.
If you’re concerned about missing a due date, features like automatic bill pay can help you stay on top of your account payments.
2. Stay Below Your Credit Limit
Try to keep your credit utilization ratio low by not using up all of your available credit.
According to the CFPB, experts recommend keeping your credit utilization below 30% of your available credit.
3. Maintain Credit History With Older Credit Cards
Account history is another factor in your credit score. So the longer you show good credit habits, the better it could be for your score.
Closing a credit card account can increase your credit utilization rate, since it reduces the amount of credit you have available. Plus, depending on the age of the account, it could reduce the length of your credit history. And both these factors could lower your score. Keep in mind that a card issuer may also choose to close a credit card account for reasons like low usage.
4. Apply for New Credit Only as Needed
You may want to consider what credit you need before applying for a new card. Multiple credit applications in a short period of time could have a negative impact on your score.
5. Check Your Credit Reports for Errors
Proactively checking your credit report for errors is another way to help maintain a good score. You may be doing everything right, but others may not. And errors can potentially hurt your credit scores.
You can get free copies of your TransUnion®, Experian® and Equifax® credit reports at AnnualCreditReport.com.
By creating some healthy financial habits, maintaining the good credit you’ve built can benefit you in countless ways.